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ARTICLE · 25 JANUARY 2016

Life and Annuity Series: Captive Reinsurance Class Actions

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There have been several new class actions filed recently challenging "shadow insurance" transactions between life insurance companies and their "captive reinsurers."

United StatesInsurance
Charles C. Platt
Charles C. Platt
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There have been several new class actions filed recently challenging "shadow insurance" transactions between life insurance companies and their "captive reinsurers." Three of those class actions are in federal court in New York (filed against Met Life and AXA). They allege specifically that life insurers violate Section 4226 of New York Insurance Law (which prohibits misrepresentations) when they reinsure or otherwise transfer risks on a block of life insurance or annuity business to an affiliated "captive" reinsurance company of the life insurer. The captive then obtains a letter of credit or similar collateral from a bank, which in turn is based on a guarantee or other financial commitment from the parent company of the life insurer, or some other affiliated company. 

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